Last year the produce industry had a major discussion on the possibility of mandatory assessment to support a generic promotion program. We tried to access the most knowledgeable people in the field, having discussions, for example, here and here with Harry Kaiser, the Gellert Family Professor of Applied Economics and Management, Department of Applied Economics and Management, College of Agriculture and Life Sciences at Cornell University and the preeminent scholar in the field.
Yet, in the end, what we found was a paucity of knowledge on broad-based generic produce promotion in the United States. Everyone was left arguing by inference from milk or beef or by making assumptions regarding the relevancy of programs in Australia or elsewhere to the American environment.
The proposal for a mandatory assessment and the generic promotion that went along with it was put aside. Yet the debate over the proposal is beginning to bear fruit for the industry and the world in the form of better understanding of the way generic marketing can influence sales of fresh produce.
Harry Kaiser from Cornell, Tim Richards from ASU and Brad Rickard and Jura Liaukonyte from Cornell have been working on a project that uses experimental economics to examine consumer response to commodity-specific media advertising (e.g., apple ads) and broad-based media advertising for fruits and vegetables (e.g., the UK 5-a-day campaign); their objective has been to understand the relative economic implications of using these two types of advertising, as well as a third approach that combines the two types.
The approach of the scholars is very rigorous and quite innovative. There is little question that the results will be of interest to both academics and the industry.
As part of our efforts at The New York Produce Show and Conference to gather the intellectual resources of the region and bring them to a broader audience, we invited Brad Rickard to unveil this important research at the event. We asked Pundit Investigator and Special Projects Editor Mira Slott to get us a sneak preview:
Q: What sparked your interest in analyzing consumer response to commodity-specific and broad-based promotion programs for fruits and vegetables using experimental economics?
A: I was following this dialogue on generic promotions in the Perishable Pundit. An editorial in PRODUCE BUSINESS in 2009 did a good job questioning Got Produce?, the term referencing a proposed generic promotion expanding the five-a-day effort. There was a lot of uncertainty that needed to be resolved before asking producers to vote on something like this.
Q: Do you have a particular connection to the produce industry?
A: I’m from a fruit and vegetable farm in Canada, Ceresmore Farms. We’re a family farm up in Ontario, which over the years has grown processing vegetables, apples, pears and some field crops. It lends me a bit of credibility in studying this subject.
There was a pretty big push in Australia on a generic produce campaign a few years ago. A study written by some R&D folks showed the program was a success, but I have colleagues knowledgeable on that campaign that conducted their own analysis. A lot of money and effort was put into that Go for 2&5 promotion. This was a motivation for me, as generic promotions are an area of work economists haven’t weighed in on. We do things differently than R&D folks and psychologists.
Q: In what ways? How could research based on models of applied economics offer new perspective?
A: Jim Prevor laid out key questions needing more research to be done before producers and handlers could really vote on a generic promotion. We honed in on issues we felt were critical: First, what would be the difference between spending more money on commodity-specific promotions relative to a generic five-a-day program? And another very real question, if you’re doing something one way and you switch, what would be the impact, or what would happen if you did a combination of both efforts?
Q: Did you also consider money thresholds, number of times consumers need to be exposed to the ads, the scope of the promotion, etc., in weighing the impact of a generic campaign? Produce industry executives often lament that their promotional marketing budgets pale in comparison to big junk food manufacturers and other processed food conglomerates.
A: Out of English-speaking countries — Australia, the UK, Canada, and the U.S. — the U.S. is least funded on a per capita basis in this area.
Q: The Got Milk? campaign inundated consumers nationwide with clever ads repeatedly, promoting the message through famous people touting the attributes of drinking milk. Was that considered a success?
A: There are different ways to measure these things. Got Milk? was successful in getting a lot of advertising awards, but producers were concerned it wasn’t selling more milk. In a Supreme Court case, producers argued it wasn’t increasing their bottom line.
The difficult thing in some cases is the counter-factual effect: what would have happened otherwise? In the case of dairy, there was a declining trend in how much milk people were drinking. A lot of people argue the Got Milk? promotion didn’t increase demand for milk, but slowed the decrease in demand. If you just look at broad brush strokes, you’d think Got Milk? didn’t do anything.
Q: It reminds me of the economic argument related to the recent recession; that if we didn’t do the bailouts, the economic picture would have been significantly worse…
A: It’s a close analogy to Got Milk? and hard to isolate what would happen otherwise. That is a good segue to a generic produce promotion. We wanted to examine this question as economists. How can we account for these changing times and add an element of control into our analysis so we can say something meaningful?
At Cornell, we have a Lab for Experimental Economics and Decision Research — LEEDR is the acronym. It’s a sophisticated state-of-the-art lab with 24 stations, and several researchers on campus use it, those curious how consumers, producers or policy-makers respond to economic incentives or changes. We thought this would be one way to shed some light on Got Produce? — by looking at the consumer side, the producer side, and the general economy and policy stages, so we decided to approach this in three stages. The first stage was to get inside the consumer’s head, when he or she sees promotion efforts, how does it register?
We wanted to investigate one of Jim Prevor’s points: How would a five-a-day generic promotion compare to the status quo commodity promotions? And following that, the counter-factual question, in the absence of these programs, what would you see?
Q: How did you go about that in a lab setting?
A: We set up an experiment comprised of six sub-experiments, where we brought a bunch of people into the lab, and every case had auctions for 8 or 10 different fruits and vegetables. We’d talk about those items, a pound of potatoes, tomatoes, carrots, and red peppers, counting tomatoes as a vegetable, and apples, bananas, oranges and grapes.
The auctions were conducted with 24 “consumers” at a time; done as a private affair, with housing around the cubicles. We ran an English style of auction, where the price started at 0, and as the price crept up, the participant when ready would click on their computer and submit their bid.
We wanted to try and make this feel somewhat real. We showed some short T.V. clips, and inserted promotional pieces. For three batches of people, we only showed the T.V. clips and no promotional pieces. For the other treatments, we’d introduce the participants in one instance to commodity-specific apple ads from New York and Washington State. And then there were another three batches of people that received an apple treatment and potato treatment with Idaho potato ads appearing. A third group had broad-based ads.
Q: Did you create a mock Got Produce? promotion for the purpose of the experiment?
A: Since we didn’t have U.S. generic produce ads, we took some from the Australia campaign Go for 2&5, and some from the UK campaign. We borrowed T.V. ads.
Q: By using UK and Australian promotions, wouldn’t your participants be struck by the different accents and cultural nuances? Were the campaigns similar in content and messaging?
A: The generic ads emphasized variety and health benefits rather than taste, and were colorful. The dialects were different but we don’t think this caused any problems. We had some treatments where we interacted with the groups and did a little broad-based generic, and a little commodity, which we called the hybrid affect.
Overall we did six separate treatments that ran through auctions during the different scenarios. There were different people in the different batches, which was an issue that we tried to account for. Say there were 72 different people, so 72 times six separate treatments, so roughly 400 people in total, and these are all different people in different batches, all exposed to media, some with promotion, some mixed.
Q: How did you account for the wide variety of people in your analysis?
A: After the experiment, we asked everyone to complete a survey to tell us about themselves, 30 different questions, their age, height and weight so we could come up with their BMI, income level, whether they were a vegetarian, female, male, how did you like the ads, etc. We tried to statistically control details about these people, and isolate all those effects to say something meaningful about the bids they were submitting into the computers.
Q: What if someone would never buy apples, regardless of how clever the promotion?
A: That’s a good question. One of the survey questions was, tell us your preferences. Then if a consumer made a particularly low bid for apples when he or she saw lots of apple ads, we could account for that.
Q: How did you recruit participants? Did you get a demographically diverse population?
A: Sometimes these experiments on university campuses are criticized because they are all students. We went out of our way to recruit staff, not students or faculty. They were all from Cornell, but could be an administrative assistant, a bunch worked as janitors, the hockey coach, we had a nice demographic. I have a chart of New York demographics and how our 400 people sample compared to New York at large. It’s impossible to get a cross-section that perfectly represents the population at large, or the New York population.
Q: What were participants told when they came into the room?
A: We paid participants $25 to come. To create an incentive-compatible experiment, we told them that at the end of the auction, people would randomly be chosen to have to buy their products. So they would either leave with $25 or a combination of money and produce.
We told them that if they see apple ads, they don’t know another group is not seeing any apple ads, or potato ads, etc.
Q: Did Phase 1 of your experiment lead to any significant findings?
A: We’re trying to understand what consumers are willing to pay for fruits and vegetables. We tried to simulate the noise we’re all subjected to.
In Phase 1, we wanted to explore whether consumers respond to these different kinds of ads. The punch line is we saw significant results for the way people filled out the survey and significant results on how they responded to the various ad approaches. These broad-based programs, or ones mixed in with some apple or potato ads, always seemed to increase their bids.
Q: How considerable were the differences?
A: We had a base line of a whole bunch of bids from our control group that didn’t see any ads. A phenomenon occurred where, for example, people bid $1.10 for apples, and when they saw the apple ad didn’t increase their bid, but if they were shown broad-based and commodity ads or just broad-based ads, their bid would grow significantly.
If you lump information together, there was willingness for people to increase their bid by 15 percent to 18 percent when watching just broad-based ads relative to the control group that saw no ads, which translates to a seven percent to eight percent increase in quantity purchased.
Q: Since participants only had the choice of 8 or 10 produce items to bid on, wouldn’t that seriously distort results? What would have happened if they had the option to use their $25 to buy a candy bar or a roast chicken? Also, couldn’t the controlled setting and limited time-period impact preferences as well?
A: This represents an upper limit on the effects of advertising, understanding we were doing this in a lab, where there wasn’t someone also selling cookies or shoes. This is a good point and one that has haunted WTP [Willingness to Pay] studies for economists, especially those that interview consumers or perform choice experiments without compensating the subjects or forcing subjects to follow up on their bids.
The best answer here is that in our experiment we randomly ask subjects to follow up on their bids; half of the auctions become binding at the end and the highest bidder for these items makes the purchase and their bid is subtracted from the $25 they receive from participating. We hope that this feature encourages subjects to pay more attention to their bids and makes our experiment more in line with reality.
Since we paid our subjects $25 to participate in the experiment, and most of them left with $25, this money is thought to be used for other food products like steak and Twinkies. This isn’t perfect, but it is better than many other approaches out there. Furthermore, we thought that things might get out of control if we included more than 8 products in the experiment, or if the experiment lasted more than one hour.
Q: What did your experiment reveal about commodity-centered ads?
A: The more important part of Phase 1 is that we see the impact for the broad-based ads, but we don’t see it for commodity-specific ads.
Q: Is it correct that the commodity ads focused on specific state products, and if so, did the purchase alternatives include state identifiers?
A: The apple and potato ads were state-specific. We first decided to focus on apples and potatoes given that they represent important fruit and vegetable crops in the U.S. Then we went looking for ads and these were the best we could find. Three of the four apple ads were for New York apples. Although we didn’t explicitly auction “New York” apples or “Idaho” potatoes, we did introduce the products in a way that indicated they were similar to the ones shown in the ads, auctioning “Empire” apples and “Russet” potatoes.
Q: Why did you elect to use commercials from state-based programs rather than national programs such as those existing for watermelon and mango?
A: A national campaign would have been much better, but we were pretty set on apples and potatoes given their market share, and the fact that they are produced in many states in the U.S. Plus, we wanted fruits and vegetables that were often sold in a one-pound size in the range of one to three dollars. The regression analysis does control for the “quality” of the ads, so the WTP estimates should be free of any distortions concerning consumer response to the particular ad.
Q: Do you think the actual content of the ads played a role?
A: The broad-based ads emphasized health. What I think happens is that a broad-based ad is for a category, all fruits and vegetables. When advertising apples, we might see a little jump for apples, but a decline in another commodity. I think of a pie chart; if the apple group puts out an ad, it might be successful in increasing apple sales, consumers will buy less bananas or oranges. So by targeting a niche, the increase is at the expense of close substitutes.
The results from this study indicate that the nature of the advertising matters. If just advertising one thing, it substitutes away from something else in the category. If advertising a category, it is now competing against another category. It’s not necessarily a revolutionary discovery.
When the French put an ad in Wine Spectator, you won’t see a one page ad for a particular brand of champagne… you see a generic ad for French champagne; the higher tide lifts all the boats kind of thing. A clever broad-based ad has the ability to increase the category. Several commodity-specific ads end up competing against each other. It’s a destructive game of cross advertising where everyone is trying to grab a slice of the pie. Instead, the industry could be competing against junk food, or meat, or dairy. Generic ads, getting people to think of fruits and vegetables, could be a better strategy for the industry.
Q: How do you compensate for the limitations of a prefabricated lab setting to address the effects of real-world factors?
A: At least in the auction, we included money incentives compatible with purchasing something, mitigating that problem of consumers saying one thing and doing something else. We do ask participants things like how many vegetables they eat per week. Since they might be concerned about revealing certain information about themselves, we don’t take their names when accumulating survey results.
In Phase 2, we want to examine exposure issues; how much exposure to the ads do consumers need in the real world to get the results in the lab? How much of a budget is required, is it $3 million or $30 million? Those are things we can address in our lab using economics. Also, there are other financial questions we need to address. The produce category is made up of many different players. In a broad-based ad campaign, should strawberry people pay as much as broccoli people? Are strawberry people more likely to benefit? How do you determine relative costs across commodities? What are the different ways to think about this? We think we could simulate scenarios, a spectrum of possibilities. Is the consumer response to advertising strawberries more than to spinach or broccoli?
And then if you put ads together what attributes do you emphasize? If you’re doing an apple ad, it’s easy to pinpoint certain attributes, such as sweet and crunchy…for blueberries it could be antioxidants, and for baby carrots it might be kid-friendly or convenience. Imagine a broad-based program. Look at ones being used in the UK or Australia and what they emphasized, breaking down all the components… Do apples and strawberries chip into this program, or increase banana sales?
First we start with consumers and then we go to the producers. The third step is the market linkage; questions involving the retailers, producers, the consumer connection, different supply chains and how these would change results. Public policy comes into this if the scheme eventually ends up being funded by growers, handlers and packers with a matching program by government. We need to run through these scenarios and the distribution impacts.
Q: What you describe seems like a big leap from your initial lab research results…
A: Our research involves phases. We started with big broad brush strokes. We’ve done the first phase, written it up and it is under review by academic journals. As we explore answers to these questions, our research raises new questions.
Professor Rickard is part a generation of bright young economists who are transforming the field of what used to be called “agricultural economics.” Like his Cornell colleague Miguel Gomez — who, as we mentioned here, is also presenting at The New York Produce Show and Conference — these economists are approaching issues without fear or favor, looking to use innovative techniques in a quest for real knowledge and understanding.
It is not all about produce; in fact, we first read a paper by Professor Rickard when he made a slam dunk case that New York State ought to allow supermarkets to sell wine. And, as the authors acknowledge, the questions regarding generic promotion won’t be resolved by one simulation. But it is an important start.
We are especially thrilled that this research was undertaken because it is really what the Perishable Pundit and PRODUCE BUSINESS and the conference portion of The New York Produce Show and Conference are all about: Raising issues, identifying questions, creating an intellectual format, provoking better thinking, finding the path that will initiate industry improvement.
Obviously we look forward to additional phases. We are particularly interested in the rent-dissipation hypothesis, which we wrote about here and the differential impact on long-lead crops such as pears as opposed to row crops that can quickly be increased in volume.
We also have a suggestion for another application of this methodology. All over the country, many states have run programs such as Jersey Fresh to promote their own state’s product. The research we have seen over the years indicates that these programs, a variant of generic promotion, are quite successful, mostly within a given state’s population. So if only one state does this type of program, it will likely be very profitable because it will switch in-state buyers to that state’s produce.
What if, however, as has happened, other states launch similar promotions? If all these promotions were equally effective, we might, as a country, spend a lot of money on promotions that leave total consumption fixed.
On the specific study Professor Rickard is discussing at The New York Produce Show and Conference, we would also like to see an exploration of the degree to which the marketing creates short term purchasing changes as opposed to long term consumption changes.
This strikes us as a limitation on this methodology. Effective marketing may get one to stock up on apples or potatoes. This may, however, reduce purchases next week. Long term, consumers are unlikely to buy more produce unless they also eat more produce. It is not clear if the advertising will produce that kind of behavioral change.
This is important work, and it represents new ways of exploring for answers to important questions. We can’t wait to find out more.
We’ve written a great deal about traceability and, after a slowdown caused by substantial industry objection, our sense is that the Produce Traceability Initiative is about to pick up speed. The big change is that the newly formed PTI Leadership Council approved a new proposal:
In its first official action, the council approved a proposal from the new Implementation and Technical Working Groups to update the labeling requirements to include a four-digit voice pick code. This change will help overcome a barrier to implementation of Milestone 7 (“Read and store information on outbound cases”).
The council adopted the open-source Cyclic Redundancy Check (CRC) 16 algorithm to calculate the voice pick code, which will eliminate the need to scan outbound cases in those operations that utilize a voice-directed picking system. The Implementation Working Group will conduct pilot tests and develop best practices to aid industry in implementing this “PTI voice pick code” solution.
This is big news. What has really held up PTI is not that a lot of shippers and wholesalers don’t like it and think it is too expensive. What has held it up is that the big retailers, including many who pledged to support PTI, came to understand how complex and expensive it would be to scan every case leaving their distribution centers. Many made it very clear that, pledge of support or no, they weren’t going to do it.
YottaMark announced over a year ago that it had developed technology and business practices to comply with those who use voice pick technology in their warehouses, and most large retailers do use the technology to avoid scanning each case as it is picked to fulfill an order and yet still be PTI-compliant. Although it has applied for patents related to its technology and business practices, YottaMark has agreed to allow the industry royalty-free use of the system.
Vocollect, a company active in voice-related technologies with some input from Giant Eagle, has put out a white paper on the matter:
The PTI voice pick code is an implementation of VoiceCode™, developed by YottaMark, a product traceability and authentication company. YottaMark developed VoiceCode specifically to support produce traceability in warehouses using voice technology to support order selection. While YottaMark has applied for patent protection for VoiceCode, they have committed to allowing use of the concepts by all members of the produce supply chain on an entirely royalty-free basis. VoiceCode is a registered trademark of Yottamark, and the PTI is therefore describing its implementation of VoiceCode as the “PTI voice pick code.”
… In brief, however, VoiceCode combines the GTIN, lot number and (if present) date code to create a four-digit “hash code.”
A hash code condenses a large amount of information into a much smaller “digest.” For a simple example, one could generate a single-digit hash code from a zip code by adding the five digits and taking the least significant digit of the sum as the hash code (12345→15→5). Obviously many zip codes will have the same hash code, but if we select a random pair of zip codes the odds that they will have the same hash code are only one in ten (such an event is called a “collision”). Nine times out of ten, therefore, if we wanted to determine whether a letter was destined for zip code A or zip code B, we could make the decision based solely on a single-digit hash code.
You can read both Yotta Mark’s announcement and the Vocollect white paper for all the details. There are some complications regarding “collision” when two cases on the same pallet share the same voice code, but, all in all, it solves a big problem for the big retail warehouses, and that will probably break the logjam and allow PTI to be implemented more expeditiously.
Yet while this voice pick technology is common in very large retail distribution centers, it is uncommon amongst wholesalers and terminal markets.
With The New York Produce Show and Conference fast upon us, we wanted to deal with traceability from the angle of how this can all play out among smaller shippers, local growers, independent wholesalers, terminal markets and brokers. After all, the desirability of new technology and practices notwithstanding, it really has never seemed that big a trick to track a direct shipment of a full trailer from a packer to a retail DC. The Northeast, though, is filled with small growers, distributers large and small, lots of brokers, small regional and ethnic retailers, lots of foodservice purveyors splitting cases and whatnot.
To gain insight into how traceability can play out in this environment, we called upon Gary Fleming, who now heads his own consultancy but had previously been Vice President of Industry Technology & Standards at the Produce Marketing Association, where he headed up PMA’s traceability efforts. We often find people in this mode to be very valuable sources of information. They have an insider’s sense of history and how things really came about but an outsider’s freedom to speak. We asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:
Q: What inspired you to start your own business? Does it relate to your fervent pursuit of the Produce Traceability Initiative (PTI)?
A: First and foremost, I wanted to spend more time with my wife and family; I got married last year. We’re very motivated by our faith and want to do things that honor our faith. Running your own company allows the flexibility to do things in ways you want to do them to insure integrity and honesty, and more opportunity to make sure morals and ethics are upheld. When working for someone else, there can be conflicting directions.
A good thing throughout my career is that half of my work has been on the technical side and half on the business side, and that’s what allows me to be so effective with business solutions that involve technology.
Early on, this played out with Efficient Consumer Response (ECR). This was a big thing in the packaged retail industry. This initiative in early 1993 was focused on supply chain efficiencies, including business as well as technology changes. A lot of what happened then is what we’re going through now in supply chain challenges. This gave me a lot of insight in best business and technology practices.
ECR promised $11.1 billion in supply chain savings. In 1997, foodservice did the same thing with Efficient Foodservice Response (EFR), which promised $14.8 billion in supply chain savings.
Q: Did ECR and EFR fulfill their promises?
A: That I don’t know in terms of the projected numbers in savings. It’s very difficult to quantify but there is no question the solutions led to transformational improvements in supply chain efficiencies and costs.
Across the food industry, influential groups were backing the EFR initiative, primarily on the buy side, generating momentum in the industry so suppliers would follow. PTI, which handles both retail and foodservice, is about standards and efficiencies; it’s the same exact concept. Through ECR, EFR, PTI and all other food safety initiatives, they all use this common thread of standards and efficiencies.
That’s what makes my company so valuable. I’ve already gone through this with ECR and EFR. I was part of the steering committee and key subgroups with both ECR and EFR, and then PTI as lead staff and primary architect. And then the GS1, Foodservice GS1 US Standards Initiative, the milestones are to match PTI.
In addition, there is the meat and poultry traceability initiative. And then, finally the one just coming out, more generically… the seafood traceability initiative.
You can see ECR packaged goods, EFR foodservice, PTI produce, meat and poultry, and seafood cover all elements of the food industry. Every single one of these initiatives uses the same standards GS1 initiative.
Q: So the standardization across industries is the critical factor?
A: If you’re a retailer, you do business not only with produce, but with meat, poultry, seafood, and consumer packaged goods manufacturers. If all these segments use the same standards, you have one purchase order system. If you want to analyze sales you can use the same field GTIN number, whether produce, poultry, fish or packaged goods, and you use the same scanners; all you have to do is buy one set of scanners.
The same holds true for the foodservice industry from the foodservice buyer standpoint.
With the introduction of the GS1 standard into PTI, I helped influence the other fresh food sectors to also use the GS1 standards by giving them the produce template for their sectors. All the other initiatives are using that specific template and adapting to their sector.
Q: How far along in the process are these different industries?
A: The meat and poultry initiative already has guidelines published, and it’s in the implementation stage. Foodservice GS1 US Standards Initiative is also being implemented. It has 55 backers. Distributors, manufacturers and operators actually funded the initiative. The last one is the Seafood GS1 Initiative, and we’re hoping to finalize guidelines sometime in September of next year. We finished produce, and every week, I helped meet challenges for seafood. I’ve been working on it six years.
Q: This must be gratifying for you to see a confluence of standards across industries. Haven’t you met with quite a bit of resistance, and been confronted by a myriad of issues and concerns from produce industry executives?
A: It is exciting for me to see it come around. I’ve been preaching this method ever since I worked for GS1, 13 years ago. It’s finally coming through. There’s still some hesitancy, but maybe people will start understanding the breadth and scope of this. No one has been able to provide lucid arguments of how PTI runs counter to supply chain efficiency.
I have an example to articulate my point: say you’re Chairman of the Board with 20 people on the board of an international company. Each comes to the meeting speaking a different language. How efficient would you be? You’d need translators, so you’d need to pay 20 different translators, which is more cost, but you’d also be investing in the hope that people are translating correctly, and then expecting people to understand in the same way. The process takes longer and is less accurate.
If the supplier, distributor and retailer are all using their own unique reference numbers, they’re all talking different languages. Multiply that by the entire supply chain and extrapolate the costs and you have a grossly inefficient supply chain. How great it would be to all if they are using the same number for traceability and efficiency. That’s what ECR and EFR did.
Q: It seems you’re framing the benefits of PTI now more about efficiency than about traceability…
A: The big argument with PTI was all about traceability, but what we didn’t emphasize was that it could also help with efficiencies. The basic point with traceability was that anyone touching case number 999 writes and records number 999 coming in and going out of a facility, and as it travels through the supply chain… then if there is a problem you’re able to track case 999.
Q: How will PTI play out in the New York region, rich in wholesalers like those on the Hunts Point Market, brokers, small foodservice purveyors, local growers, such as Amish farmers, and the auction scene? Doesn’t this dynamic create numerous complexities?
A: Due to the fact that there are so many terminal markets and farmers and brokers in the New York region, it will help for them to attend my session at the New York Produce Show and Conference because that area hasn’t been addressed in detail with PTI.
There’s a fact we’re all going to have to get used to: the current law out there as it relates to the Bioterrorism Act doesn’t exclude those players. Current legislation both in the Senate and House of Representatives doesn’t allow exemptions for the terminal markets, brokers, smaller farmers, and all those elements of the supply chain you mentioned.
You just need one area of entry not monitored and that’s where terrorists will focus attention or where contaminated product will get into the food chain. All it takes is one company not to adhere to the regulation and it will ruin it for everyone. If everyone in the supply chain except for one company spends time and money and resources to create traceability, and one company gets hit by a recall, it will tarnish the integrity of the whole chain process.
Q: Is it realistic to expect every single player involved in the intricate supply chain throughout the New York region to implement PTI?
A: If the Bioterrorism Act doesn’t give exemptions, and the proposed traceability initiative doesn’t, terminal markets, brokers, and smaller farmers will be bound by this like everyone else. They need to come to the session and find out what they need to do to adapt this to their process. It hasn’t been done to this point.
These conversations will not be easy. They are very difficult and very challenging. But if you believe the premise that proposed current legislation is going to pass, they’ll have to deal with it. Instead of fighting it, they need to find a way to adapt with the least cost and resources. They need to take proactive steps now.
Q: Why is there so much resistance? Isn’t it essentially inevitable that there will be an outbreak or recall at some point, regardless of industry diligence, food safety investments, best practices, product testing and other preventive measures?
A: This is not related to food safety, but traceability is an aspect of it. Food safety in my definition is ways to prevent foodborne illness from occurring. Traceability is what happens in the event if something slips through the food safety net, which is inevitable. You can not test every single piece of produce in the supply chain. That’s when traceability comes into play.
Q: Is PTI the only answer? Aren’t there other viable alternatives?
A: I’m a very passionate person. If I believe something is honest and credible, then I get behind it with a lot of passion. That’s why I think I’ve been effective because I truly believe it’s the right thing to do, and holistically the most efficient way to go about it. I’ve seen it work with all these other initiatives. I’ve worked with all these industries that have a lot more dollars in it.
Number one, it’s an honest solution; and number two, it’s an efficient solution. That is why no one has been able to come to me with an alternative that is better. The toughest part is trying to convince one company, whether buyer or seller, to look at what is best for the whole supply chain. If a buyer says do it my way, it’s more cost on the supply side, and vice versa, the best supply side way hurts the retail side.
Go back to my example of the international board; one of the 20 members is Russian so he thinks the Russian language is best and he’s not going to budge. Everyone else would have to learn Russian, which is very laborious and costs a lot of money and time. If everyone says, let’s come up with a common language, we’ll all have to put a little bit of work into it, but everyone benefits.
English is an international business language and most people know this. There is not a single grocery store that does not use the GS1 standard. Every retailer, not just grocers, and they can use the exact same system for produce. This is at the case level, but even at the item, case and pallet level, GS1 standards are used throughout all the initiatives, ubiquitously throughout.
Q: Could you further relate this to the unique aspects of the produce industry in the New York region? If everyone in the supply chain doesn’t participate, then doesn’t the whole traceability chain risk breaking down and becoming untenable?
A: The regional aspect is the brokers, terminal markets, and local farmers, and they have had minimal exposure to the GS1 standards that serve as the foundation for these traceability initiatives. They’re hoping they’re excluded, but even restaurants and individual stores are going to have to step it up a bit. They can’t be excluded because then it will break the whole process.
Everyone’s actions to spend money and resources to set up traceability will be for naught if a local farmer sells a produce item to Wegmans and a few consumers get sick and then it can’t be traced. All producers of that item are implicated.
Q: Couldn’t Wegmans control the outcome by only sourcing from farmers that had the proper traceability system in place? And wouldn’t that be an incentive for farmers to implement the standards?
A: The argument is that retailers won’t use them as a supplier if the supplier is not up to standards. There are ways to minimize costs for a local grower and we’ll talk about that in the presentation. The terminal market has a different service operation and system, which involves other strategies. My company doesn’t sell anything other than council to help people understand how it will impact their operation. I work with companies on strategies of incorporation and implementation.
Gary has often helped us to better understand traceability, contributing pieces such as these:
Guest Pundit — Traceability And The Need For A Common Language
Guest Pundit — Pairing The Global Language With Technology
Guest Pundit: Traceability — A Forgotten Piece Of Food Safety
Gary Fleming Speaks Out: Produce Traceability Series Part 1: ‘Absent Of PTI’
Symbolon’s Fleming Sheds More Light On Traceability
What Is The ROI On PTI?
Now we are looking both for an update, especially since this voice pick has been approved, and a label modification required by PTI. We are also looking forward to hearing Gary speak to how a more fragmented industry can best deal with traceability issues.
Although Gary makes the point that everyone needs to be involved, we can’t say we see how that will evolve in the absence of not only legislative mandate but vigorous enforcement. We remind Gary of the story we have often run… one sent to us by a most intelligent wholesaler regarding “Ken, the guy in the red truck”:
Putting in a system to trace product gets more difficult the further down we go in the distribution chain. Stand on the floor on a busy Terminal Market and try and imagine where the product goes after it is sold by the Wholesaler. A customer known as “Ken, the guy with Red truck,” pays cash for a pallet of tomatoes. He takes the tomatoes to his garage where the boxes sit on the floor next to cleaning supplies, motor oil, and who know what else.
He and his kids (2 of whom just used the toilet without washing their hands) dump the tomatoes on a dirty tarp to sort them for color. The green ones sit in the garage for a few days to color up during which time one or two rodents snack on tomatoes. When they finally ripen, Ken delivers the tomatoes to some of the finest restaurants in town for all of us to enjoy.
Somehow I don’t think that Ken or even a legitimate small wholesaler or purveyor is interested in investing in a traceability system. They will have to be dragged kicking and screaming to the table. The problem is that the system is only as good as its weakest link, and unless Ken is a part of the system it doesn’t work.
We’ll look forward to hearing what Gary has to say to “Ken” at The New York Produce show and Conference.
You can learn about the conference here.
You can register for the conference here.
Dan’l Almy of DMA Solutions has often contributed to the Pundit with pieces such as these:
Pundit’s Mailbag — Profitable Participation
‘Fresh For Ellen’ Raises A Question: How Should We Define Success?
How Will Success Be Measured For Fresh For Ellen Social Media Campaign?
DMA’s Philanthropic Anniversary Celebration
Plea For Ellen DeGeneres To Consider Produce In Her Sugar-Free Diet
Perishable Thoughts — Hope Obama Helps Country ‘Arise’
We’ve appreciated the input and have genuinely enjoyed watching Dan’l build her business. What is impressive is she seems to always have it together. At the United FreshPAC fundraiser in Las Vegas, everyone usually shows up at the bowling alley wearing whatever they put together. Dan’l’s team is there with embroidered bowling shirts.
Recently, on her blog, The Core. Dan’l addressed an issue of how to make the third day of PMA’s trade show more productive.
These third days are difficult at all shows because attendees always feel they can cut out early, especially if they are flying cross country and want to avoid an extra day out of town. Because the attendees are a little sparse, the exhibitors tend to downsize staff on that third day, with the top executives leaving. This causes a negative cycle because now any attendees who do come by the booth can’t speak to the top executives, which makes them feel the third day is not productive.
In any case Dan’l, who is very focused on outreach to the consumer, has been speaking for years to lots of people in the industry about how we can reach out to consumers. Well the thought of a down day at PMA and the desire to reach out to consumers sort of came together and Dan’l made a suggestion:
…reaching the consumer is not a simple move from point A to point B — it’s a journey that requires continuous nurturing. One of the steps along the way is to target those who are influencing our consumers’ knowledge and opinions about the trends and innovations that we so proudly put on display each year.
What if… next year’s 3rd day of Fresh Summit was about inviting select groups of “influencers” (and yes, they happen to be local consumers themselves) to attend an expo tour so that this one time a year, they have the chance to really be immersed in our innovations without the distraction of competing retail items, enjoy the flavor of our products, engage with the growers and suppliers, provide one-on-one feedback and share their experiences with our products?
What if… this effort was organized so that industry volunteers would host or lead these small groups of influencers and allow them to participate in a guided tour through the show floor on the last day?
Think about the mutual benefit of having, let’s say, 200 or so influencers divided into small groups and becoming involved in the excitement that we experience each time we come to Fresh Summit. Why shouldn’t they see firsthand the beauty that our industry represents?
Dan’l went on to suggest reaching out to several categories of people: Leading news groups, food bloggers, and food writers, local PTA presidents, regional healthcare providers, Human Resource VPs of large local corporations, sports nutritionists from local sports clubs, students and professors from local culinary schools and many other influencers.
Well, over at The New York Produce Show and Conference, both the Eastern Produce Council and PRODUCE BUSINESS have already been working on attracting many of these influencers, but Dan’l crystallized the idea in a fresh new way.
We had one disagreement with Dan’l — we didn’t see this type of outreach as something that had to wait for downtime; we saw it as part and parcel of what we are trying to do with The New York Produce Show and Conference — reach out to the community and build a stronger industry and a better world.
So what do you do when a person of energy and expertise comes up with a great idea? We hired her. We are proud to announce that The New York Produce Show and Conference has retained Dan’l Almy and DMA Associates to run an outreach program to consumer influencers.
Yes, time is short and the show is only one day, not three, and we suppose that lots of people would have said hold off to next year.
But there is no time like the present, and we will reach out to those who can be reached, influence those who can be influenced and begin the proverbial journey of a thousand miles by taking a single step.
We hope to do good for the industry and the world through this outreach to consumer influencers. We also hope, much as the state governments can serve as laboratories of innovation for the Federal Government, that The New York Produce Show and Conference can serve as a test market, a laboratory of innovation for ideas the industry can use in other places and contexts.
New York is America’s marketing capital so it somehow feels right that we begin this industry outreach at The New York Produce Show and Conference.
A sincere welcome aboard to Dan’l and the DMA Solutions team.
Sometimes highly paid speakers give the best value to the audience in ways they never intended. Such was the appearance of A.G. Lafley, the former Chairman & CEO of Procter & Gamble, at the Produce Marketing Association’s “Fresh Summit” event in Orlando.
His speech itself was mostly standard B-school stuff, interesting and useful but hardly earth-shattering. His great contribution to the business world was moving P&G into developing countries just in line with a time when those developing countries became affluent enough to start buying low priced consumer goods, such as toothpaste and detergents. Unfortunately Mr. Lafley did not give a good explanation for how that came about, so we don’t know if he deserves the credit or if it just sort of serendipitously happened on his watch.
Yet if you go to workshops and sessions for a hundred years, you can’t get a more valuable lesson than that Mr. Lafley gave when he began to talk about P&G’s FIT rinse. The product is a wash for consumers to use to clean their produce.
FIT was (and is — since it is now owned by others) a product of some significance. Mr. Lafley spoke about it as if he was highly engaged with it. He acknowledged $60 million in losses on the product. It was also clear he knew nothing about it. Nothing about why it had failed.
We last wrote about FIT, already under new ownership, when they tried to use the spinach crisis as a lever to get consumers to buy the product, although there was and is no evidence that the wash is in any way effective against e. coli 0157:H7.
Back in 1995, Pundit sister publication, PRODUCE BUSINESS, did a cover story on the matter, titled Fit For What?!?
FIT was strongly opposed by many on the supply-side, notable Lorri Nucci (now Koster) and Bruce Obbink at the California Table Grape Commission. Their complaints were that FIT was being marketed in a way that implied that certain products, including broccoli and grapes, required special washes to be safe.
The truth, though, is that FIT failed because produce VPs hated it. They saw it as a giant flag saying that the produce was not safe to eat. Oh, P&G was powerful, probably paying lots of slotting fees to the chains, so the company had to be careful about how it was marketed, but of their actions there would be no doubt.
In the PRODUCE BUSINESS cover story, many retailers were quoted. Read the little section quoting Bob DiPiazza:
Bob DiPiazza, vice president of produce operations at Dominick’s Finer Foods, Northlake, IL, doesn’t take a position on the product. “I don’t have a strong opinion. I haven’t been presented with it. It’s not an issue here.”
But, speculating on what will happen if Fit is introduced in his market — the Chicago area — he says, “If we get requests for the item, we’ll do what we’ve always done and give the customers what they want. That doesn’t mean we have to aggressively merchandise, promote or display it. That’s a choice every marketer can make based on consumer demand. We’re not accustomed to telling customers we won’t get something for them. I may not personally like the inference the product makes, but that doesn’t entitle me to make a choice for our customers.
It is a brilliant quote. One wonders if Bob DiPiazza is a secret fan of the work of Georges Clemenceau, the French journalist and Prime Minister who famously acknowledged that the “voice of the people is the voice of God” and that the task of a leader was to follow that voice “shrewdly.”
For just as Clemenceau packed a lifetime of experience in that word “shrewdly,” so too did Bob DiPiazza pack in a lifetime of gaining mastery of the system in the words: “That doesn’t mean we have to aggressively merchandise, promote or display it.”
Translation: I may have to carry this stuff if you intervene with my bosses or pump up consumer demand with coupons and advertising, but I’m putting out two bottles behind the coconuts. You are going to have to earn every sale.
Yet here was A.G. Lafley, who when he was Chairman and CEO of Procter & Gamble held one of the loftiest perches in corporate America, chattering on about the inexplicable failure of FIT, obviously oblivious to what really happened.
Big business has many, many advantages. There are economies of scale and the ability to demand expertise that others simply couldn’t access. But, as this little story teaches, bigness has disadvantages.
What didn’t A.G. Lafley know what happened? Did someone decide to hide the truth from him? Did someone not want to be the carrier of bad news? Did his direct reports not know? Was it too small to merit the time to get to the bottom of it?
We don’t know, but it is obvious that if Goliath can be that blind, David really does have a chance.
That local is all the rage is not subject to question.
However, there is a real question about the degree to which sales of “locally grown” are actually increasing and what any increase might mean.
Supermarkets are promoting local vigorously, but the vast majority of these local promotions are nothing new — it is the same summer sweet corn promotion that has gone on for decades. Because these traditional local products account for such a large share of local sales, if they do not go up, it is very hard for local to increase significantly. Yet we are hearing from many chains that, although they are marketing local heavily, their total local sales are in traditional ranges.
Now it could be that this is because of competition. As we mentioned here, there has been a tremendous growth in the number of farmer’s markets. Yet at least some of the farmers who man these stalls are grumbling a bit. They tell us that there are a few high volume markets that are worth their time, and that at least some of these new farmer’s markets are just sucking the strength out of the old ones.
This is very problematic for the local movement. The notion that farmers get a higher return by selling direct to consumers is completely dependent on the fact that family members are willing to work for free selling the family produce. Most farmer’s markets require the farmer or his family to be doing sales. The number of family members available to sell is limited. So, more farmer’s markets in the same geographic region run the same risk that retailers run of cannibalizing their own stores.
There is also an explosion in various forms of community-supported agriculture (CSA’s), which seems to indicate a lot more produce being sold locally. Yet, the bottom line is this, the best information we have is that overall produce consumption is flat, so if local is up robustly, one would expect everything else to be down.
Either the local volume is up over such a small base that it is just doesn’t matter very much or perhaps supermarket sales of local are not that robust. It is just the effort to show affinity with the community through marketing that is robust.
Maybe all these farmers markets are stealing sales from each other or are opening in progressively weaker locations so, as the number of farmers markets increases, the average sales per market may be going down.
It is also possible that a lot of things purchased at the farmer’s market or bought as part of a CSA are really a different kind of purchase than what people buy in a grocery store.
CSAs deliver what they choose, not what customers select, so maybe consumers don’t eat a lot of the stuff or still buy their regular shopping list in addition to whatever they get.
The farmer’s market has become a social event, even a tourist outlet. Perhaps consumers buy interesting things in such places, such as unusual varieties, and then don’t eat the purchases. Or they try them but not to the extent where they cut back on their normal grocery order.
In a couple weeks, we have a national election coming up. Don’t be surprised to hear TV commentators’ announcing that they are getting word that turnout is exceptionally high or exceptionally low. Typically, when the dust settles and the numbers come in, the turnout was not “exceptionally” anything.
There is a lot of marketing going on around local right now. Don’t assume sales are as intense as the marketing until we see real numbers.
Our piece highlighting Professor John Stanton’s research into the local vs. organic issue, titled Research To Be Unveiled At The New York Produce Show And Conference Shows ‘Local’ Preference Versus Organic, brought this enthusiastic response:
With great excitement and anticipation, I await The New York Produce Show and Conference and the presentation on Local Preference Versus Organic, by Dr. Stanton.
John Stanton, undoubtedly in my book, is one of the best, if not the best authority on consumer behavior when it comes to purchasing foods and produce.
He continues to “Delight” his audiences with thought-provoking data, information and advice on how to reach consumers in a way that will influence their purchase decisions. Time after time, Dr. Stanton has identified consumer traits that if properly applied in marketing, will end in success!
His presence, along with the other outstanding presenters at the New York Produce Show, is certainly worth the registration fee alone, while the excitement of the show will be a bonus!
— Jim Allen
New York Apple Association, Inc.
Fishers, New York
Our work identifying the reasons and purpose behind The New York Produce Show and Conference and describing the content and events is now substantial:
New Event Planned For 2010: Eastern Produce Council And PRODUCE BUSINESS Announce The New York Produce Show And Conference
New York Metro’s Economy Is 12th Largest In The World
Retail “Thought Leaders” Panel Announced For The New York Produce Show And Conference
Famed Food Writer Joan Nathan To Speak At New York Produce Show And Conference
A New Hypothesis On Local: To Boost Sales, Sell It Through Supermarkets… Cornell’s Miguel Gomez Previews His Upcoming Talk At The New York Produce Show And Conference
Rutger’s Professor Ramu Govindasamy To Speak Out At The New York Produce Show And Conference…Research On Asian And Hispanic Produce Marketing On The East Coast Identifies A Profitable Opportunity
Research To Be Unveiled At The New York Produce Show And Conference Shows ‘Local’ Preference Versus Organic
Rooftop Farm Just Part Of The New York Experience
Exciting Spouse/Companion Program Highlighted At The New York Produce Show And Conference
Professors From Cornell And Arizona State Universities To Unveil Generic Produce Promotion Research Results At New York Produce Show And Conference
PTI Voice Pick Code Solution May Propel Progress, While Presentation By Gary Fleming At New York Produce Show And Conference Offers Path For Fragmented New York Region Closer To Compliance
New York Produce Show And Conference Retains DMA Solutions For Consumer-Influencer Outreach
We appreciate Jim Allen’s vote of confidence and, yes, the conference alone would be worth attending. Add in a trade show, cooking demos, networking events, general session and the historical nature of this event — a return to New York of a major produce industry conclave after a lapse of over half a century — and we feel very good about how it is all coming together.
For those who are interested, you can learn more about the event here.
And can register here.
Just as we finished writing the above article we received exceedingly sad news. Jim Allen’s sister, Diane Wood, passed away of a massive stroke. She was only 62.
You can get details on services and other information here.
You can send Jim an e-mail of condolences here.
Diane was a teacher for 33 years before she retired, and her condolences roll in from former students. Notes like this:
To the Wood family, I am so so so sorry for your loss. I had the pleasure of being taught 8th grade English by Mrs. Diane Wood, and she was beyond amazing. So sweet and caring and ALWAYS there when you needed her. A one- of-a-kind and she will be greatly missed. I know she will watch over each and every one of you as well as many others whose lives were blessed because they knew her somehow.
Deepest condolences to Jim and his wife Ellen and all those who have lost, in Diane’s passing, a loved one and a friend.
Our piece, Sweet Onion Fraud, pointed out that because there is no definition of a “sweet onion,” supermarkets across the country are selling sub-par products and this, inevitably, leads to lower consumption. Here is some of the feedback:
I applaud you for the concise sweet onion article in today’s e-mail. I am a big supporter for establishing standards in the sweet onion category.
Keep up the insightful information.
— Ralph J. Schwartz
Director of Category Management
Director of Value Added Marketing
Potandon Produce LLC
Idaho Falls, Idaho
Well, let it never be said we didn’t get praise here at the Pundit for being concise!
A different correspondent saw the issue in the context of his experience with tree fruit:
Although I have spent most of my career dealing in fruit, I was involved in trying to develop a sweet onion program originally in Chile. “Sweet”, as you mention, is a relative term, and ‘hotness’ is really the issue.
I am sure there are eminently qualified onion folks who will tell you the 3 primary factors are; variety, planting date plus global latitude, and fertilized soil conditions — all playing a role. The goal is to reduce the amount, or the ‘effect’ of sulphenic acids.
The sweet onion dilemma is very similar to trying to define what constitutes a ‘tree ripe’ peach (again, a complex variable formula of variety, cultural practices, harvest pressure-Brix, and the ripening temperature sequence).
Unfortunately, the relative difference in perceived ‘value’ of hot vs. sweet is an inducement for commercial producers to cheat and mislabel especially in a “hot” market (sorry bad pun).
In California peaches, a number of retailers have independently set their own standards for minimal fruit pressure and Brix levels, and they buy (and reject) accordingly, even though there are no official standards for what constitutes a ‘good tasting ‘ peach.
Eventually, more retailers are going to do their own research and adopt individual standards of what constitutes a ‘sweet onion’. Major commercial grower-packer-shipper-importers need to be sure they are ‘involved’ in the process and agree, perhaps at least to a de facto minimum (or, perhaps maximum in onions) standard that covers most commercial offerings. However, as with wine, the factor of “terroir” will be hard to regulate.
— Richard A. Eastes
Rixx Intl. Marketing Co.Inc.
Doubtless there are difficult cases, and the desire for sweet onions year-round in large quantity will probably lead to onions that are less sweet at some times of the year than at others.
However, just because there are hard cases doesn’t mean we shouldn’t do anything about the easy ones. One way retailers can deal with this is by selecting top-quality vendors. This constrains the supply chain and might result in paying a little more, but at least the retailers — and the consumers — get what they pay for.
Another option, as Rick points out, is to develop retail specifications. Then, at least everyone is on an even playing field… although our understanding is that in Australia, they set up a sort of “certified field” system defining sweet not with regard to the outcome but to the way it was grown.
We also suspect USDA will have some interest here. How can the USDA stay relevant if grades are not adjusted over time to address the needs of the industry?
In the short term, though, this is a retail issue and what has to happen is every VP needs to send his onion buyer the piece we ran and let the buyer know that he doesn’t want the cheapest onion with a “sweet” sticker; he wants the best value sweet onion he can get.
This will do more to increase consumer satisfaction and thus consumption than any marketing campaign.
Many thanks to Ralph J. Schwartz at Potandon Produce LLC and to Richard A. Eastes at Rixx International Marketing for weighing in on this important issue.